- Federal student aid chief Richard Cordray has announced plans to reform the student loan service.
- Fixes include adopting a unified process for all services for easier refund options.
- But many borrowers and lawmakers want to see a large student loan forgiveness happen first.
President Joe Biden’s top student loans official recently acknowledged what many borrowers have known for years: the repayment process is cumbersome and flawed.
That’s why he’s planning fixes for the industry, but many borrowers are currently focusing more on general student loan relief.
On May 19, Federal Student Aid Chief Operating Officer Richard Cordray released a blog post detailing how he plans to revamp the student loan department over the coming year. He explained that currently more than 35 million federal student loan borrowers repay their debt to six different student loan companies, and since each company has its own repayment process, the “disjointed service system is often confusing for borrowers and frankly the quality of work has not always lived up to our standards.”
“Borrowers are understandably frustrated when they receive inconsistent information about something as important as their student loans,” Cordray wrote. “Too often, borrowers don’t take advantage of the repayment options available, and millions have defaulted as a result.”
Given that current loan servicing contracts are set to expire in December 2023, Cordray plans to transition borrower accounts to the Unified Service and Data Solution (USDS), which it says will hold all departments accountable to “top level of performance” and will work to reduce chargebacks and defaults. According to Cordray, USDS will replace service contracts for direct loans and the Federal Family Education Loans (FFEL) program to give all federal borrowers account management capabilities on StudentAid.gov and reduce disruption account transfers.
Targeted loan forgiveness programs, like the Public Service Loan Forgiveness (PSLF) and Total and Permanent Disability Discharges (TPD), will also shift to federal student aid. sellers which will manually process the requests. Cordray expects the shift to USDS fixers to begin after December 2023.
Supporters want focus on canceling student loans
The student loan industry has been under scrutiny for decades. Democratic lawmakers have pushed for the Education Department to revamp failing programs like the PSLF and income-based repayment plans, and some have led investigations into predatory behavior by student loan companies that have pushed borrowers to take on unmanageable debt.
While many lawmakers and advocates think fixing the student loan industry should be a priority, they want Biden’s student loan forgiveness campaign pledge fulfilled first. Recent reports have suggested Biden is considering $10,000 in relief for borrowers earning less than $150,000 a year, but he has not yet confirmed an amount or when that decision will be announced. Democrats say there’s no better time than the present for this to happen.
“If we can bail out the crooks on Wall Street, yes, we can cancel all student debt in this country,” Vermont Sen. Bernie Sanders said recently. wrote on Twitter.
529 advocacy groups, led by the Student Borrower Protection Center, signed a letter two weeks ago calling on Biden to write off student debt broadly, saying it will “increase household wealth, increase the creation of small businesses and provide a much-needed economic relief during this period”. historical period of inflation.
While some Republicans have vehemently opposed any form of blanket student loan relief, arguing that it would bribe voters while costing taxpayers, many borrowers and lawmakers do not want Biden is wasting the opportunity by implementing a small amount of targeted relief.